Team Favorite: Fueling Success for Mercedes F1 with Toto Wolff

On this staff favorite episode, Barry Ritholtz speaks with Toto Wolff, Team Principal & CEO of the Mercedes-AMG PETRONAS F1 Team. Prior to joining Mercedes, Toto spent time in the investment world, founding his own company Marchfifteen in 1998 and Marchsixteen in 2004. In 2009 Toto combined his passion for racing and business by investing in the Williams F1 Team. He eventually came to be the team's Executive Director, helping to lead them toward their first win at the Spanish Grand Prix in eight years. Shortly after that win, Toto became Managing Partner of the Mercedes F1 team, where he now holds a 33% stake. In his time with Mercedes, the team has won eight Formula One Constructors' Championships and seven Drivers' Championships. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:58Speaker 01

  Bloomberg Audio Studios. Podcasts, radio, news.

• 1:05Speaker 02

  This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

• 1:12Barry Ritholtz?

  What can I say about this week's guest? Toto Wolff, Principal CEO of Mercedes' Formula One race team. What an incredible career from a winning racer to an investor and venture capitalist to a person who just kind of became a principal at Williams and then eventually, after that team surprisingly began to win, got recruited over to Mercedes where he has put together a fantastic track record. His rookie year at Mercedes was the same rookie year for Lewis Hamilton. Obviously, they've had an amazing run together. I don't know what else I could say about this conversation.

• 1:57Barry Ritholtz?

  If you're a fan of Formula One racing, if you're a fan of managing a team of people, if you're interested in how to wring out every last millisecond of performance, you're going to find this conversation absolutely fascinating. I know I did, with no further ado, my discussion with Mercedes F1's team principal, Toto Wolff. I don't want to waste time singing your accolades. Let's just jump right into this. Undergraduate, Vienna University of Economics and Business.

• 2:29Barry Ritholtz?

  How did you end up in in racing? It sounds like you were going into finance.

• 2:33Speaker 04

  Dropout.

• 2:34Barry Ritholtz?

  Dropout.

• 2:35Speaker 04

  Yeah, so, yeah, I was born and raised in Vienna and went to the Vienna University of Economics, but actually raced in junior formulas at the time and wanted to be a race driver. And when that ended abruptly, ran out of money and we had a very bad spell of accidents in Formula One, so I lost a sponsor, I decided I'm gonna quit both, I'm gonna quit only uni and I'm gonna quit racing and launch myself into, you know, working.

• 3:03Barry Ritholtz?

  And you were fairly successful as a racer. You began in Austrian Formula Ford. You won the 24 Hours of Bahrain, which is an unusually, any 24-hour race is difficult. How do you, what's the key to winning 24 Hours of Driving?

• 3:19Speaker 04

  Yeah, so the 24-hour race was in Dubai and was insofar relatively important because it was the first big race of 24 hours in the Middle East. So you're three drivers, or four, and you're having two-hour stints and it's challenging from mentally and from the human body because sometimes you have to get up at 2 o'clock and drive from 2 to 4 in the night. But it was all part of my racing and I loved every minute.

• 3:42Barry Ritholtz?

  So you go from racing to saying, alright, I don't have a career in racing. I'm gonna go into finance and you found March 15th in 1998. Tell us a little bit about what sort of investing you were doing in the late 90s.

• 3:57Speaker 04

  Yeah, so the first company was called March 15 and then March 16 and there is not a lot of meaning behind it, it was just a date I incorporated it and that felt the easiest. So back in the day, you wouldn't think a lot about brand. And I went to the US for a couple of months and realized that internet companies were coming up here, Yahoo, America Online and Netscape. And went back to Austria and figured out who is doing that in Austria. And stumbled upon a few websites and met these people, sometimes not even companies. One was a seventeen year old boy that ran the largest free SMS platform online and set up

• 4:41Speaker 04

  structures around it. It was equity for consulting, so I didn't get any, didn't buy anything because I didn't have the money. And it was just a good timing in ninety-nine and two thousand, we started to IPO companies and it became a proper venture, venture capital company from, from consulting, actually.

• 4:57Barry Ritholtz?

  And, and let's fast forward a little bit to two thousand and nine. You invest in the Williams F1 team and eventually in twenty twelve, you become their executive director. How, how is that transition? How do you go from being a venture investor to running a team?

• 5:14Speaker 04

  Yeah, the, the ten years in between was going from pretty much tech investor into, into motor racing. I, I bought a touring car team. We, we were doing Formula Three engines for Mercedes. It was quite an extensive program, but about our rally team as well. And so in these ten years, I kind of merged my passion for the sport with the investment world. And as you say, Williams was the first Formula One team I got in myself into, had a, had a minority stake. And then I ran it in two thousand twelve with Frank Williams because the CEO decided to depart. And this is where basically my Formula One, active Formula One story started.

• 5:56Barry Ritholtz?

  So, so Williams at the time wasn't exactly front of the grid. You helped them win a big race and suddenly you're now competing with much better known, better funded teams. How are you competitive with, you know, you're fighting an uphill battle when you're at Williams?

• 6:14Speaker 04

  Energy only.

• 6:16Barry Ritholtz?

  Just energy?

• 6:16Speaker 04

  Yeah, we didn't have the infrastructure, not the capability. The drivers were, were not on the level of Lewis Hamilton and others. It was the energy in the team. People gave it all they had, heart and soul. And I think we moved, we moved barriers, we, we moved, we fought against adversity and we won a race just because the people gave it their all.

• 6:41Barry Ritholtz?

  So you're involved in an initial public offering for HWA AG, the company behind Mercedes Racing. Tell us a little bit about that.

• 6:54Barry Ritholtz?

  IPO and did that lead to your relationship with Mercedes?

• 6:59Speaker 04

  Yeah, that's quite interesting because that when AMG was bought by Mercedes, the racing side was spun out because the big Daimler corporation didn't want to have the headaches with motor racing. You know, with the unions, this is weekend work and you want to stay agile as a corporate to say, well, we are in the sport or we're out without having too much overhead and headaches. So that was spun out and it was a really good high-tech company. They build engines for Formula Three, as I said before, touring cars for the very famous DTM racing series. This is the equivalent of NASCAR in Germany or in Europe.

• 7:37Speaker 04

  Limited editions road cars for AMG and high margin business and I bought forty nine percent of that that business with the founder of MG. And we IPO'd it and and sold it to to investors and then to a Qatari investment fund and that was a success story.

• 7:55Barry Ritholtz?

  So how did that IPO lead to you eventually getting tapped by Mercedes to both take a piece of the of the team and become principal?

• 8:07Speaker 04

  So it was multifaceted because we had this company where we were basically doing all the work for Mercedes racing outside of Formula One. I had a driver management company where fifty percent would be paid by Mercedes, fifty percent by myself. And so we established a trusting relationship. And then I obviously embarked into being with Williams, which was a competitor of Mercedes. We won a race and they were interested to understand how can that be? You're underfunded back marker team and you're beating us on track. And they asked me, could you evaluate that? And I said, I don't want to badmouth anybody, but I can. So I did that. They came back and said, we'd like to offer you to run this as a head of Mercedes Motorsport.

• 8:49Barry Ritholtz?

  Was that a surprise? Was this like?

• 8:51Speaker 04

  Very.

• 8:52Barry Ritholtz?

  Did you have any during that conversation, hey, why is a well-funded big team asking me how we beat them? It sort of seems like an unusual situation, especially how competitive everybody. He seems to be in the paddocks.

• 9:05Speaker 04

  I think the board realized at that stage that it bought a world championship team, uh, winning team with Braun. And that the results were getting, were getting worse and worse and uh, they felt they had no grip on what was actually happening. And that's why they asked me, they knew that I was not biased because I had another team, but I was with them in touring cars. And this is how it all came about.

• 9:27Barry Ritholtz?

  So you become a thirty percent owner of the Mercedes Petronas team. Um, and the principle, how long is it before? That team starts winning races. What were the first couple of years like?

• 9:42Speaker 04

  So I, my first day was Jan- in January twenty thirteen and it was a difficult situation because. I got the job of head of Mercedes Motorsport and at the same time shareholder of the team and executive director. But those two posts were, you know, were with people that were icons in the industry. A German who was running Mercedes Motorsport and then Ross Brown, the highly decorated technical director who was running. The team and so had to manage that situation eventually took over. And when I joined, we started to win races. Um, in that first year. We won three races with Lewis joined that year as well, same time as me.

• 10:17Barry Ritholtz?

  That was his rookie year. You started the same time.

• 10:20Speaker 04

  Yeah, we were both rookies in Mercedes, basically. And um, and that started to be a successful year and by the end we were a front runner. And we, we finished second in the championship and from then on we introduced new engine regulations in fourteen, which was. Core, really core expertise of Mercedes, obviously. And then we, we had this run of eight consecutive world championships.

• 10:40Barry Ritholtz?

  Unprecedented run. We've never seen anything like that. Even in the Schumacher era, I don't think he won eight consecutive. Um, championships. Um, I have to ask an obvious question. You're in venture capital investing. You're in racing. What similarities do you find between the two fields? You're, you're dealing with a lot of data. You're dealing with a lot of unknowns. Did your background in venture investing help you put together the winning streak at Mercedes?

• 11:11Speaker 04

  It all starts with the human being because in tech, human beings have ideas, they manage processes. And it's the same in Formula One. When you talk about a company or a team, what is that? And it's basically a bunch of people that are on this professional journey together. So around people that run racing cars and I did the same when I was a venture capital investor. I tried to hire and develop the best people to run a specific organization.

• 11:41Barry Ritholtz?

  And I mentioned when you joined Mercedes, you took a 30% ownership stake. Did I read this correctly? You recently raised your stake in that. So what's your ownership now of the team?

• 11:53Speaker 04

  Yeah, exactly. When they offered me to run it, I said, that is super honorable. But I'm a shareholder at Williams and the deal we found is that I bought 40% from the Abu Dhabi Sovereign Fund. And then Niki Lauda came in and he bought 10%, so it was 60 Mercedes, 30 myself and 10 Niki Lauda. And when Niki passed away, we found another investor and today it's three shareholders, each with 33.3%. So I increased my stake, as you say.

• 12:20Barry Ritholtz?

  So you're not a majority shareholder, but you're the principal. How do you juggle dealing two other substantial shareholders, especially when things become challenging?

• 12:32Speaker 04

  I mean, I couldn't wish for a better shareholder in group because within Eos, we got a tremendous powerhouse behind us. A very financially profitable organization, obviously it's chemicals business and that is, you go through cycles. But Jim Redcliffe, the founder, is involved in Manchester United and in America's Cup in skiing, in cycling. So that was always, that was a good deal. Financially made sense. It was during COVID. And then Mercedes obviously providing us with this mighty car brand, the seven most valuable brand in the world, and I'm running it. And between us, it's very well understood who contributes. And I, myself, very lucky that I have a shareholder with Mercedes.

• 13:14Speaker 04

  That's basically giving us the keys, um, the responsibility for this brand and it's been great. The current CEO La Caleños, Marcus Schaefer, CTO and the whole board gang is fantastically supportive. And, uh, you know, that's a part of our success.

• 13:29Barry Ritholtz?

  You, you seem to thrive in very competitive environments, not just investing and racing, but, um, America's Cup and yachting, freediving, like you do a lot of what some people would perceive as calculated, high-risk activities. What, what is the competitive drive? Where does this come from?

• 13:53Speaker 04

  I don't know it. When I was younger and obviously in racing, it was always a relative competition. You want to beat the other guy. And I realized over the years that it was actually more a competition with myself, uh, setting expectations and trying everything, um, in order to achieve that. And today, racing, whilst it's still relative and we want to beat our competitor, this is, it is more for us. It's not only me in the team, we want to surpass our expectations. And if we lose, it's not particularly losing against another team, it's losing against ourselves. And the activity is like you mentioned, um, is a fight against myself. How far can I push myself? And I love freediving, it has a meditative component for me.

• 14:37Speaker 04

  And I like, I like the water and, you know, achieving certain depth. Um, these expectations that I set myself and I don't need to have anybody, uh, competing with me.

• 14:48Barry Ritholtz?

  What, what's the longest you can hold your breath? I, I know you must have timed this to the second.

• 14:53Speaker 04

  Four minutes and 15 seconds.

• 14:55Barry Ritholtz?

  What, what do you think about some of these, you know, world champions who are holding their breath? 10, 12, 14 minutes. It seems superhuman.

• 15:04Speaker 04

  Yeah, there is obviously the greats of the sport that that have achieved it. But there is two different angles to it. Some are basically you pump fresh oxygen in your body to fill your lungs. And that basically doubles your your time underwater, holding your breath. And when you're doing it without it, it the form is quite a good benchmark.

• 15:28Speaker 00

  At K K R, we've spent fifty years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance and sports. K K R has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. K K R, understanding what matters. Visit kkr.com/whatmatters.

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• 16:35Barry Ritholtz?

  So we talked earlier, your rookie year is with Lewis Hamilton. I know you're a very competitive guy. Did you have any sense when you were first beginning, the sort of run the two of you were going to go on?

• 16:50Speaker 04

  No, not at all. I think when I joined the team, they finished fifth in the world championship. And then we quickly became so competitive. And it is not particularly just because of Lewis and myself. A really good group came together and started to form in two thousand twelve, before my time, and then it kind of started to roll.

• 17:11Barry Ritholtz?

  And I want to put some flesh on those numbers. Eight consecutive Formula One Constructors Championships from 2014 to 2021. Seven consecutive Drivers Championships, and I put an asterisk on it because we all know that eighth one was stolen. We won't go get into that. I don't want to put words in your mouth. This is me saying that. You mentioned the whole team and that it's not just you or the driver. Tell us about all the various people involved in this team. This really is a team sport.

• 17:45Speaker 04

  Absolutely. Every single team member contributes to the team's success. And how I'd like to make the, let's say, the bridge to people that would be saying, "Well, what is my contribution to the car's speed?" It is that someone in another team at Ferrari or Red Bull is doing your job, whether it's in accounting, it's financing, cleaning, someone is doing their job. And as long as you're able to outperform that person and you keep that in mind, you're contributing to the team's dynamic and to the team's success. And that's why everyone in their position, if done with discipline and responsibility, is contributing to making the car faster.

• 18:27Barry Ritholtz?

  And when you say everyone, I want to go into some details about some of the things you did because initially people thought it was ridiculous and then the data backed you up. At one point, you had the people who cleaned the bathrooms, make sure everything was wiped down twice a day. You did these changes to something as simple as the brush they used to clean the bowl. And people thought you were a little obsessive compulsive about it. "Hey, why is Toto so nuts about the bathroom?" But it turns out, your team gets ill last, they suffer stomach viruses last, there was a uptick in the overall health of everybody in the organization once you implemented

• 19:12Barry Ritholtz?

  that. What detail is too small for you to notice?

• 19:16Speaker 04

  I've rarely seen...

• 19:20Speaker 04

  Cutting edge businesses without the founder, the CEO or some of the top management being obsessed with detail. You have to be, because if you don't have an attention to detail, how should the rest then fly? And I came into the office my first day and I sat in the lobby and there was an old Daily Mail, a week old Daily Mail newspaper and some old coffee cups. And when I came to the guy, Ross Brown, who was running, and I said, well, that's not how Formula One teams should look like. And the answer was, the engineering is what makes a car quick and not the appearance of the reception. And I said, well, I disagree because it's the attention to detail that is important. And if the reception as a point of sale for an F1 team is not the standard, then what is the rest?

• 20:00Barry Ritholtz?

  Why do people think they're mutually exclusive? You can have great engineering and a clean bathroom and lobby.

• 20:06Speaker 04

  Yeah, and shows your mindset, I guess. And you mentioned the bathroom story, which is, has become a little bit famous. And it's not being obsessed, but long before Covid, we had hand sanitizers that were drilled into the walls of the races where we were going. We had a hygiene manager, today is many of them, that looked after our health. When you have sponsors and CEOs and husbands and wives that are visiting our Grand Prix and issuing big checks, they are expecting these standards. You can't have a dirty bathroom. And I, for me, there's no job too small. And I know what I expect from going into a bathroom. So this is how I taught them, what I would think it should be done. And yeah, it's maybe one example of many others.

• 20:51Barry Ritholtz?

  I mean, it's an extreme example, but it points to a certain culture and mindset. Talk a little bit about the importance of culture to any organization.

• 21:02Speaker 04

  Culture is the immune system of any organization.

• 21:05Barry Ritholtz?

  The immune system.

• 21:06Speaker 04

  The immune system. Because when times are tough, that keeps the team together, keeps the people aligned, beyond maybe the core objectives. Because when you fail, you know, those objectives become difficult to reach. And here's the crux. You can quickly put some values on a piece of paper and say, that's our culture now. And we project it on the wall in a PowerPoint. And this is the standards we want to live to. But the truth is, you've got to live it day in and day out. And for us,

• 21:41Speaker 04

  Attitudes like loyalty and humility, integrity are just not, are just not words that we think about sometime because this, but these are the basic principles upon we act. The old motto, win at all costs, doesn't work for us. And I don't wanna work, I don't wanna win along those lines because it means you're not maybe playing by the rules or you're stretching the rules to a degree that I feel comfortable. We are in a business of reputation and in that respect, I wanna do it the right way and everybody in the team wants to do it the right way. We're playing the long game. It's not a game or a race, but it's the next 20 years.

• 22:20Barry Ritholtz?

  Huh, really, really interesting. I have a bunch of rule questions for you later, but I wanna stay on the topic of culture and people. How do you invest in and retain talent? And I don't mean just a driver, I mean engineers, everybody across the board. How do you find and retain the best talent?

• 22:41Speaker 04

  Like any other team and company out there, that's the most complex of all actions. Because hiring the best talent and developing isn't yet a guarantee to strong term success because environment change, race change, people, people change. And I think this is at the core of what we are trying to achieve and retaining them in the same way. You know, we've been successful eight times in a row, won the championship and then obviously people get interesting opportunity. Somebody doubles your salary on another team, you have to have the responsibility towards your family to consider such moves. And that's why it's the normal ebb and flow with people coming and people leaving, but

• 23:24Speaker 04

  you wanna stay with that core team that you deem as being essential for the success.

• 23:28Barry Ritholtz?

  How, how do you plan for that? I, I know there's a sort of hyper competitive set of, I don't wanna use the term poaching, but someone says, hey, we need this sort of mechanic or this sort of engineer, I like that guy at that team. How do you plan for that? How do you cope with that loss of talent?

• 23:49Speaker 04

  I think you need to have an overview about your organization and a blueprint of how you want to have it. And sometimes you even sometimes you operate along those lines and you still fail in terms of the results. So knowing who performs to which levels, where you're having gaps, do you need to hire outside or develop from within, bring up talent, and who is at risk to be poached anyway. I think an overview of the organization is key.

• 24:19Barry Ritholtz?

  So let's stay with that topic. Last year was a really challenging season. How do you keep the team motivated? How do you face challenges when just it seems like maybe two years ago especially felt like everything was going wrong for the first half of the season? How do you keep everybody's spirits up and people focused on the job at hand?

• 24:41Speaker 04

  It starts with myself. I have to acknowledge that maybe my motivation or my energy levels are not that good if our results just don't happen. But it needs to, I'm the one who kind of needs to have that energy impulse into the organization and keep the organization up. So do my colleagues on the leadership level. And that's not easy. It's not easy here having full stones. You set the expectations based on the previous results and if they were great, then obviously everything is a failure. So it's been a process over the last three years to rationalize, not be carried away with your emotions either way.

• 25:25Speaker 04

  And it's a valuable time and I'm sure we will be looking back in 10 or 20 years and saying, we had those eight consecutive world championships and then we had a P3, we finished third in a championship, then second in a championship. Now it's more complicated with fourth, but we won three races. So this is still a more successful season than the ones before. And it's all part of the learning, as tough as it is when you're right in there.

• 25:48Barry Ritholtz?

  So you're working on a new legacy with two young drivers. What can we expect from Kimi Antonelli? How do you compare his driving style to his predecessors?

• 25:59Speaker 04

  Obviously Lewis Hamilton is irreplaceable. He is the greatest champion that has existed. He's a fantastic personality. He's a core family member of our team. But he decided he wants to pursue the Ferrari dream, like every Formula One driver wants to do that. He got a fantastic framework of an agreement and I'm at peace with it because we decided to sign a short term deal with him because we wanted to promote Antonio Nellini into the team and not lose him like we did with Verstappen 10 years ago. So that is all very structured and amicable. And now we have two drivers in our team that are really juniors since their early days. George Russell was a Mercedes junior since

• 26:42Speaker 04

  he was 17 and Kimi since he was 12. So having a lineup of an 18 year old and 27 year old is our future. And that means developing and there will be moments where we tear our hair out, but he's quick and we've seen that. And the same way George, it's a great opportunity for George to be the more senior driver in the team at that stage. I'm happy about it.

• 27:04Barry Ritholtz?

  So Hamilton won Silverstone in July. Kind of felt like a bittersweet victory. What were you thinking when he took the podium?

• 27:13Speaker 04

  It was only sweet. There was no bitter part of it because we are still racing together. He will be part of Mercedes' history forever. And him winning the British Grand Prix in his final year with Mercedes against all odds, we couldn't have scripted it better.

• 27:28Barry Ritholtz?

  And there has to be some sort of farewell we're planning for him at the end of the year. What are you thinking about? How are you gonna, you know, put a cap on this long term relationship?

• 27:42Speaker 04

  When you look at it from a, let's say, purely professional side, well, he's leaving Mercedes, he's going to one of our competitors. Do we want to leave that like that? And the question is, the answer is no. Certainly not. We had so much success with each other. We want to celebrate the time that. That we had and in that respect, I think there's more many activities planned. He doesn't know about it. He doesn't know what it is.

• 28:07Barry Ritholtz?

  We won't reveal any secrets here.

• 28:09Speaker 04

  He knows that something's coming, but he doesn't know what it is. And I'm very much looking forward to that emotion, which to this moment, that's clearly going to be very emotional.

• 28:17Barry Ritholtz?

  It does seem like you are playing a very different game, a very long game than everybody else. I sometimes, and I know Drive to Survive is, you know, emphasizes the conflict and stuff. But it sometimes seems that people are just thinking about this race or maybe this season. You guys really are looking out a decade or so into the future. How how is that built into your DNA?

• 28:46Speaker 04

  I think without wanting to be disrespectful, it's different if you're running an organization as an employee that has a certain shelf life and needs to perform in order to stay in the job. Or my situation as a shareholder, being able to look at the long term. If you're, if you know that, you know, I know if I'm not team principal, I'm going to be on the board or chairman still responsible for over for the overall company. So I kind of get that, that other people need to have more short term perspectives. It's their livelihoods and their professional career. And on the one side, I can look further down into the future. But that shouldn't be an excuse of not being successful at a specific moment.

• 29:27Barry Ritholtz?

  You you mentioned some of your drivers have come from Mercedes junior teams. Where do you see talent coming from these days? Not just driving talent, but crew and team members, mechanics, engineers. Where are you looking for the next great hire for Team Mercedes?

• 29:44Speaker 04

  You just need to have a knowledge about the various channels that talent can come up in. On drivers, we are looking at car drivers from the age of eight years old. And we're seeing who can, you know, who is outstanding.

• 29:56Barry Ritholtz?

  You're literally tracking people a decade before they can even think about being at one.

• 30:01Speaker 04

  Absolutely. We have our scouts that are on the most junior of international car races that are looking at those kids and we're not the only ones. Ferrari is doing that and some of the other teams. So and when it comes to engineering, we have a very strong undergraduate program, internships and work experiences. We're giving opportunities to underprivileged and underrepresented groups into the team because we believe, not only for the sake of doing it, to do good, but we believe more variability and diversity in our people will give new perspectives and new perceptions and and a lot of ambition and drive. So very early into, you know, academic careers, we're looking at people.

• 30:41Barry Ritholtz?

  Let's talk a little bit about that diversity. I read following the Black Lives Matter protests and and the death of some American citizens at the hands of police here. You had a long conversation with Lewis Hamilton. You painted the car black, which was sort of unprecedented, that hadn't been done before. Kept it that way for at least a season, if I remember correctly, and then made a commitment to, hey, the minorities are very underrepresented in F1. How can we expand this? How has that process gone and how successful have you been?

• 31:16Speaker 04

  I think long before Black Lives Matter,

• 31:20Speaker 04

  as a team, we have always thrived to be diverse. It was part of my upbringing that I saw what it means to be discriminated.

• 31:32Speaker 04

  Antisemitism was a strong topic in my upbringing in Vienna. And so that is always how we have been calibrated. And then when obviously Lewis was pushing very hard for more diversity in our population in the team and we embraced that from the beginning. And then Black Lives Matter started with, you know, obviously the the things that happened in the in the US and he said, shouldn't we, do you think we should paint the car black? Which is a highly unusual question because the silver arrows are very much how the Mercedes's are being called in the racing world.

• 32:06Barry Ritholtz?

  That's that's the history going back to what, the 1930s?

• 32:09Speaker 04

  Yeah, the very the first Mercedes racing car or the early Mercedes racing cars were too heavy. So we scratched off the the white collar and it was the bare aluminium, the bare silver, and that stayed. But it was a very quick decision. I called the the board of Mercedes, at least listen, I have an unconventional question here, and I think it's good. Are we doing this? And it was an absolute capital letter, yes, let's do that. And so you can see the support of the wider Mercedes organization for these topics. And here we go, the car is still black until today.

• 32:44Speaker 01

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• 33:21Barry Ritholtz?

  Let's talk a little bit about Netflix and Drive to Survive. I'm a fan of the show. I couldn't help but notice that in the first season, you guys really didn't participate in it. It now looks like you're not only participating but enjoying it. Tell us a little bit about your experience with Netflix.

• 33:44Speaker 04

  Clearly Ferrari and us got that wrong at the beginning because we decided for ourselves we are participants in the Formula One World Championships. And my colleague at Ferrari, outspoken Italian, said, we are not Cirque du Soleil, so we're not gonna act. And my approach was, I tried to be pragmatic and said, the moment you have microphones on you and cameras, you're going to start to act. And I don't want my engineers to act for some cameras. So we said, we're not doing it. But that was a blessing in disguise. Because as we were not playing as the main protagonists, Netflix was showing smaller teams, was showing drivers that weren't competing for race wins or podiums. And that in itself created the interest from our fans for the sport. So you two rejoined.

• 34:29Speaker 04

  And from then on, it's been a blast. They're doing a fantastic job. The impossible task of showing a sport.

• 34:38Speaker 04

  A real sport, an honest sport. And on the other side, trying to make it spectacular and exciting and drama and glory. But it's been a great success for Netflix and Formula One overall.

• 34:48Barry Ritholtz?

  So it's obviously brought a ton of new fans in, not just overseas, but especially here in the United States. And now there are multiple races that take place here each year. How has the Netflix documentary expanded the audience and expanded where you guys actually run races?

• 35:07Speaker 04

  I think there were a few pillars that came together for it to be so, Formula One to be so successful. We were the first sport to actually race in twenty twenty. We had a very disciplined and stringent COVID protocol. People were at home, Netflix was showing our series, and racing was excited, exciting. The Verstappen, Hamilton, Saga, the Grand Prix that you mentioned, the twenty one Abu Dhabi. Many young drivers being avid social media protagonists. And all of that contributed to a boom of Formula One in the United States. We, we've always been in Austin, it's a fantastic place.

• 35:48Speaker 04

  And last year was the single biggest event in the United States, to my knowledge, with four hundred forty thousand people. And since then Miami has joined and Las Vegas has joined and Formula One has been booming in the United States in that affluent demographic. Our strongest growing group is the young females, fifteen to thirty five, believe it or not. And that shows how, you know, all these things have come together and we are on a successful path. But you've got to be wary. We know that we are in the entertainment industry. We need to provide a product that is exciting. And if we fail to do so, we could as well, you know, hit some stumbling blocks.

• 36:26Barry Ritholtz?

  So you do a pretty good job at not only maintaining your emotions, but not revealing a lot. I kind of got the sense in the beginning of the first season that you participated in. It was like, all right, this is an annoyance, but I'll play. It seems like over the past few seasons, you've kind of learned to enjoy yourself. More on camera and sometimes it feels like you're just throwing out these little bombs and leaving them there for some of your competitors, especially at Red Bull. You seem to like to get under other people's skin in a very subtle way. How much fun has the entire Netflix Drive to Survive experience been for you?

• 37:10Speaker 04

  At the beginning, most of the teams gave Netflix a full access to their premises and to their team members.

• 37:19Barry Ritholtz?

  By the way, you could do that if you're the back of the pack, right? You have too many, too much stuff that you don't want anybody else to see.

• 37:25Speaker 04

  Yeah, but even front-running teams felt they needed to be front, left and center into the camera, and that's not something we wanted to be. So we gave, we immersed them fully for our race this season. And funnily enough, these were always our worst performances, but not Netflix's fault. And over time, you just, you just realize that you embed those people in, into the team. We put them in team clothes, so they weren't looking like aliens in the garage. And since then, they have just been part of our, of our, of our sport. And they've always been very fair when it comes about, you know, cutting out stuff that was not appropriate or that wasn't right to say. And it's been a great, great relationship.

• 38:09Speaker 04

  And some of our, you know, some of my colleagues, they, they're just keen on being a little bit more on telly. I'm trying to stay authentic to who I am. Sometimes that, you know, makes me shine in a not-so-good light. I'm not proud for some of the moments that were captured. On the other side, I want to just continue to, to be like I am and not act. I'm not good at act.

• 38:28Barry Ritholtz?

  That's very fair. Let's talk a little bit about what's going on in F1 today. It's pretty clear that over the long haul, no single team has produced the best car year after year. You could have a run, but eventually, the platform changes, the rules change, it's sort of cyclical. Just how challenging is the F1 engineering? It seems like it's at an incredibly high level.

• 38:57Speaker 04

  Formula One has always been at the pinnacle of racing and high tech. We're an organization of two and a half thousand people, half of them on the engine, the other half on the chassis, and it's science. We're trying to utilize the best infrastructure that there exists today. Things are starting to really kick off on AI. And as an example, we operate wind tunnels and computational fluid dynamic technologies, et cetera, et cetera. And in that respect, it is a huge, huge engineering challenge. And but, you know, having the best people and the best infrastructure is still no guarantee for success, as it as it's been shown in our performance at the moment.

• 39:39Speaker 04

  Rules change in Formula One and rules change to have balanced performances out. And twice, these changes were thrown at us and we came out on top. And this last time with ground effect cars, we were caught out and we were not among the, you know, winning teams.

• 39:53Barry Ritholtz?

  So let's talk a little bit about some of those rule changes, including rules that don't really seem to be enforced. First, what's your most and least favorite rule change of the past few years?

• 40:06Speaker 04

  Well, obviously I have a certain bias. So if I look from the team's perspective, ground effect cars caused a lot of problems because the lower you run to the ground, the faster you are, that smashed the floors up. And we were really not great at finding the best compromise here. But, you know, the rules are the rules. You need to you need to be trying to to be the best. And it's the same conditions for everyone, as long as everyone plays by the rulebook. And that's the tricky bit.

• 40:33Barry Ritholtz?

  So let's talk about that. What rule do you think should be more strictly enforced and they kind of softly enforce? Like, what what are we not being strict about that we should be?

• 40:46Speaker 04

  I think the FIA, which the governing body is trying to to be compliant and to enforce regulations, but sometimes, you know, they are facing a group of many thousands engineers on the team sides, and they are maybe 20. So they are always on the back foot, trying to keep the sport under control, and that's not an easy task.

• 41:05Barry Ritholtz?

  What's your take on the budget cap that's now imposed on F1 teams? When they did this in the National Football League here, it was to create a level playing field so all teams could be competitive. What are you seeing with this cap? How is it affecting the way you guys hire and engineer the cars?

• 41:25Speaker 04

  Well, the cost cap was implemented by Chase Carey, who knew everything about media and football in the United States. And he said, I'm gonna, I need to protect you from yourselves. Because Red Bull, Ferrari and Mercedes, we were outspending each other to have the best talent and best technologies. And therefore, we were always going, we were going faster than many of the small teams. And he, he came in with that. I was against, obviously, because we had the resource. But he came in and our business models have changed since then. We are profitable entities and not just a marketing activity. And you can see that today, there's four teams that are fighting for, for race victory. So he was right.

• 42:04Barry Ritholtz?

  Where does the budget cap show its biggest effect? Is it in, in the top speed of the cars? Is it the handling of the cars? Is it the driver selection? Where do you see the biggest impact of that, that cap?

• 42:18Speaker 04

  Well, drivers, for example, are still excluded, which is something we are looking at for the future and certain marketing costs. But as a matter of fact, everybody spends the same amount of money.

• 42:29Speaker 04

  Today, it's about one hundred and sixty, one hundred and sixty-five million dollars a year on engineering. And

• 42:34Barry Ritholtz?

  That's a big number.

• 42:35Speaker 04

  That's still a very big number, but we spent double before that. So how should a small team like Haas compete with a Mercedes juggernaut that's spending double the money on engineering? Today, it's the same. Obviously, that catch-up phase is gonna take longer because we have infrastructure that's been created since a long time. We spent a billion in our sights, I guess, in the last ten years. But over time, that's gonna level out, and that's why it was the right decision.

• 42:59Barry Ritholtz?

  So let's talk about some other teams. First of all, what do you think about Andretti? Should he be allowed to join? Should there be another team in Formula One?

• 43:08Speaker 04

  First of all, the teams have no say in this. It's the governing body and the commercial rights holder. My personal opinion is that if a team wants to enter Formula One, it should be carefully evaluated, like it's being done in the US. Like the NFL decides who is joining. And for us, it's, it's a very easy exercise. If a team can contribute to the, to the, to Formula's success, Formula One's success by increasing its audiences, marketing power, et cetera, then it's a logic consequence that as a team, we would be for it. But then, of course, we have no vote. We just can't be, just give our opinion. And I think this is the exercise that Formula One and the governing body need to evaluate, who is providing a real USP.

• 43:55Speaker 04

  And providing a contribution to the sport that makes it grow beyond the current curve.

• 44:01Barry Ritholtz?

  Right, so in the US, when we expanded baseball and we expanded football, there was a little dilution of talent. You had a little, you had fewer juggernauts, although arguably, Tom Brady and the New England Patriots ran the table for quite a while. Is that a risk if we add more teams, or there's plenty of talent to go around?

• 44:25Speaker 04

  I think you need to embrace all competition. We are there to fight against the other teams, and whoever's doing a better job deserves to win. So that is not at all a limiting factor. I think, like the US leagues have done it, it needs to be carefully evaluated what the benefit is of increasing the amount of teams joining for the incumbents and also for a new team and the sport overall.

• 44:54Barry Ritholtz?

  So let's talk about drivers. Lewis Hamilton, Max Verstappen, the previous generation, Michael Schumacher. How do you rate these top Formula One racers?

• 45:07Speaker 04

  Each of them was the predominant driver in their areas, eras. Each of these drivers have been the predominant drivers of their era. And it's very difficult to compare Fangio to Most, to Senna, to Schumacher, and Lewis Hamilton, Verstappen now, because they're all different. And we wouldn't do them justice by doing such a simple comparison. But if you look at the pure numbers, today Lewis has scored the most victories, the most pole positions, and is on equal par with Michael Schumacher in terms of titles. Maybe he should have, could have won more in 2021.

• 45:52Speaker 04

  Um, so that's the fact of the method.

• 45:57Barry Ritholtz?

  Huh, really interesting. So here's what I'm gonna do. I'm gonna ask my curveball question and then I have a whole bunch of technical questions. You had this fascinating quote in, in a boating international, which I thought was really, really interesting. Quote, "I think in life you must have three motivations. Somebody to love, something to do, and something to dream of." Explain that. That's not exactly what I think of when I think of a Formula One principle.

• 46:29Speaker 04

  I think I had some tough moments in my life. My upbringing wasn't easy. My father died very young. We literally had no money. And over the course of time, mental health has been something that I have struggled with at times. And so I came to the realization after, um, you know, becoming older. What is it really that makes us happy? That makes us strive? And these three things kind of summarize it for me. Um, when you are running out of dreams or when you're running out of activity and if you can't have someone to share it with, then for me, um, there is such a big gap that, that, that exists in your life

• 47:14Speaker 04

  that I would, you know, but that's maybe just my personal view.

• 47:18Barry Ritholtz?

  Well, well, that's very philosophical. It's not what we typically think of when we think of competitive, um, sports. It, it's thoughtful and introspective and it just stood out to me as not what I would have expected from you.

• 47:33Speaker 04

  I deal with people, you know? This is all about humans being on a journey, um, in, in the team, trying to be successful. And if you are, you know, more vulnerable, um, in terms of your feelings, you introspect more. That's happening, that's happening to me all the time. So, uh, I think, uh, you know, we are more visible leaders in organizations. We should be. We should be speaking more about mental health rather than appearing like the unbreakable, unbreakable individuals that, that have never weak moments.

• 48:10Barry Ritholtz?

  So let's spend some time talking about, getting a little technical, talking about some F1 issues that I think are really fascinating. So it seems like a lot of the head-to-head racing takes place in the middle of the field, not the front of the field. What do you think about some of the proposals and some of the ideas to make that head-to-head passing in the front of the field? How are the rules being considered so that you just don't, I mean Monaco is a special case, but it seems like in some races it's much harder if you have two people neck and neck for the number two car at the front of the, at front of the grid to pass the number one car?

• 48:56Speaker 04

  I think there's two reasons. It's very track specific. Many tracks, even with close, with close performances, you can overtake. Long straights are important factor because the aerodynamic efficiencies of those cars are so good that it's difficult to get out of the slipstream because there isn't anyone, any slipstream anymore. The other thing is that the competition is so close. Sometimes you have a second between P1 and P15 and therefore-

• 49:20Barry Ritholtz?

  A second, wow, that's amazing.

• 49:22Speaker 04

  That's amazing. We have top eight cars sometimes separated within three or four tenths. And that's why there is no car ever to be, to be so much faster. So it only works with strategy and tire degradation. But this season has been pretty successful in terms of overtakes and excitement.

• 49:38Barry Ritholtz?

  So there was a comment from Benito that making Audi's success will be like climbing Everest. What are your thoughts on that?

• 49:48Speaker 04

  I think that's a pretty good analogy. Formula One is a very high entry barrier sport. But if somebody can do it, then an organization like Audi, I mean, they have been very successful in in motor racing in general. Their Le Mans program was the best ever. And they have the capability and they will attract the people um to make it a success. But one thing that I've learned in Formula One, you need time. And I hope that as an OEM, they are capable of giving the project enough time, like Mercedes has given us enough time to become successful.

• 50:26Barry Ritholtz?

  Let's talk about gearbox and transmission development. Are we at peak gear changing? Is there more performance to be run out of that?

• 50:35Speaker 04

  Now we're getting very specific.

• 50:36Barry Ritholtz?

  Yeah.

• 50:37Speaker 04

  Um, so gearboxes today are fully automatic seamless shift gearboxes. And it doesn't go, you know, there's no torque brake anymore.

• 50:47Barry Ritholtz?

  It it's literally instant, like there's just a millisecond between gears.

• 50:52Speaker 04

  You wouldn't even feel it, um, which is, which is amazing technology. So that is pretty um uh managed, you know, to the max of what it can be. And in power units in twenty twenty six, we're becoming sustainable engines, still highly efficient, highly powerful, fifty percent combustion, fifty percent electric, but with a hundred percent waste-based biofuel. And this is where the world is going.

• 51:17Barry Ritholtz?

  Zero carbon.

• 51:18Speaker 04

  Carbon emission reduced to zero because it stays in the cycle. So I think we are role, we need to be role models. In the auto industry, we need to be innovative. EV hasn't been as um the implementation of electric vehicles hasn't been as quick as we all thought. And and therefore, fueling the best engines in the world and the quickest cars in the world with a biofuel, I think, is a good way of um participating in the energy transition.

• 51:48Barry Ritholtz?

  So you guys have done a lot of um work, both modeling and and using AI for um wind resistance and and the the dynamics of the car in wind tunnels and how it's going to react. It seems like that is the most challenging aspect to take from the computer to the track. Um, is there some sort of a formula where you're testing something? How do you decide this is go or no go when it comes to actually implementing all of the aerodynamics to the actual car?

• 52:24Speaker 04

  There's lots of science behind it, and it's not only wind tunnels, because that is pretty old technology, but there's simulations, simulations tool, driver in the loop simulators, CFD and lots of other highly sophisticated development capability. But correlation to the track is then another, is then another topic. First of all, you have a driver in the car, the human being, you could say the engine is called the weakness between the steering wheel and the engine. Good and bad days, how do you, how do you put that into data? So correlating that is today the crux of the matter. And that's something that all

• 53:06Speaker 04

  the teams struggle, that their simulations are telling them one thing, but the drivers are telling them something else.

• 53:12Barry Ritholtz?

  It seems more art than science.

• 53:14Speaker 04

  I know, I fundamentally believe, and we in the team do that, it is science, and it must stay science. But we haven't with this current ground effect cars, all of us figured out why sometimes it doesn't correlate with the virtual world.

• 53:31Barry Ritholtz?

  Huh. It's a model, what's the old line from Professor George Box? All models are wrong, but some are useful? I, is that how the ground effects end up working out in the real world?

• 53:43Speaker 04

  I didn't, I didn't hear that sentence, but it pretty much sums up where we are today.

• 53:47Barry Ritholtz?

  Yeah, a famous quote about economic modeling, all models are wrong, but some are useful. It very much works out. Let me jump to my favorite questions that I ask all of my guests, starting with, besides Drive to Survive, what else do you watch on Netflix? What keeps you entertained?

• 54:06Speaker 04

  Well, I was never kind of a TV person so much. I, I prefer to, to read or do some sports. But most recently, there's more and more interesting streaming series coming out. I like sports documentaries. The last one that I enjoyed was Sprinters. That was a different sport that I didn't, that I didn't know a lot about.

• 54:34Barry Ritholtz?

  Still about speed?

• 54:35Speaker 04

  Still about speed. I liked the Tour de France documentary. So that's more the kind of spectrum that I like to watch.

• 54:43Barry Ritholtz?

  Let's talk about mentors. Who helps shape your career? Who helped put you on the path that you've been on?

• 54:52Speaker 04

  Um, when I was eight years old, my, my dad got very ill and, and died a few years later and my mother could barely make our living. I was responsible for myself and my sister. And that, um, very much carved my personality. There was no mentor.

• 55:11Barry Ritholtz?

  Huh.

• 55:11Speaker 04

  Um, I was, I was, I had the responsibility and accountability since my early years and um, that's who I am.

• 55:19Barry Ritholtz?

  Our final two questions. Someone's interested in a career in racing, in Formula One, in high performance engineering. What sort of advice would you give them?

• 55:31Speaker 04

  My advice to someone would be like, um, if you're able at an early age to find out what you enjoy doing, and that may change. I think, by the way, young people are much too under pressure to find their so-called passion at the age of 22, which is nonsense. Give them, give them time to be all-rounders and then in their late twenties to find out what they want to specialize in. But, um, you can, you can become all you want. If motor racing or engineering or driving is what you think you're good at, uh, then give it all you have and you will be eventually successful.

• 56:05Barry Ritholtz?

  And our final question, what do you know about the world of Formula One racing today that you wish you knew when you first started out with the Williams team?

• 56:14Speaker 04

  Uh, all of it. I mean, literally when I started, I, I didn't understand, um, many fundamental topics in Formula One, but it's part of the trajectory. You've got to learn it the hard way sometimes by doing it and by failing. So that's all, you know, was all important.

• 56:32Barry Ritholtz?

  Uh, thank you, Toto, for being so generous with your time. We have been speaking with Toto Wolff. He is the principal and CEO of Mercedes F1 team. If you enjoy this conversation, well, be sure and check out all of the previous 500 or so we've done over the past 10 years. You can find those at Bloomberg, YouTube, iTunes, Spotify, wherever you find your favorite podcasts. And be sure and check out my new short form podcast, At The Money. Conversations with experts about your money, earning it, spending it, and most importantly, investing it. At The Money, wherever you find your favorite podcasts or in the Masters in Business feed. I would be remiss if I did not thank our crack team

• 57:17Barry Ritholtz?

  that helps put these conversations together each week. Steve Gonzalez is my audio engineer. Anna Luke is my producer. Sean Russo is my head of research. Sage Baumann is the head of all podcasts here at Bloomberg. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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